If you’re interested in taking out a mortgage, you may be curious about whether a 15 or 30 year mortgage is best. A lot of people ask this question and we’re here today to share some important facts about each mortgage type.
Once you’ve learned the definition of each mortgage, you’ll be able to compare and contrast them more effectively.
We hope to empower you as a borrower by giving you the ability to choose the mortgage which is just right for your own particular financial picture. Without further ado, let’s talk about each mortgage type and its pros and cons...
Bear in mind that both of these mortgage types are fixed. This means that interest rates will remain static over the loan terms. These fixed mortgages are in contrast to adjustable-rate mortgages, whereby interest rates fluctuate according to money market conditions.
15 Year Mortgage Facts
This mortgage has a 15 year loan term and that’s a lot shorter than 30 years! Of course, this means that you’ll be able to pay off the mortgage faster. We all dream of living mortgage free, as it opens up so much disposable income, so there are advantages to going shorter with this type of mortgage loan. As well, with this loan type, you’ll need to pay less interest on the loan. This means that the loan is actually less expensive.
However, the amount that you pay down on the loan each month will be higher than it would with a 30-year mortgage. So, you’ll need to prove to a lender that you’re good for the money! It’s harder to qualify for this shorter-term loan. As well, you’ll need to feel financially secure in terms of being able to make payments on time, and still have enough cash left over in order to lead a decent lifestyle.
30 Year Mortgage Facts
While 15-year mortgages certainly have their "pros", they may be too costly in terms of monthly payments and this is why you should consider a 30 Year Mortgage before making a financial decision about which mortgage to apply for. While you will need to pay more interest on a 30 Year Mortgage, the benefits of lower monthly payments may outweigh the drawbacks.
For example, if you aren’t sure what the future holds, a longer mortgage term may help you to feel a bit safer. In other words, when your monthly payments aren’t higher, as they would be with a 15 Year Mortgage, you’ll be able to weather any financial storms. You’ll also enjoy more disposable income each month, as you will have a lower mortgage payment which makes it simpler to save extra cash or treat yourself to things that you want.
Now that you know the basics, you’ll be ready to decide which mortgage type is most suitable for your needs.